Taxes On Savings

November 24, 1985

ONE BIG reason that savings and investments in this country are so low is that the taxes on them are so exorbitant. A man making 8 percent interest with today's typical 4 percent inflation has a real income of only 4 percent. If his marginal tax rate is 50 percent he will be paying 100 percent of his real interest income in taxes. More typically he will be in the 30 percent bracket and pay a whopping 60 percent of his real interest income in taxes.

While Americans are having most of their savings income destroyed by taxes, the Japanese have virtually no taxes on interest or investment income. As a result their standard of living soon will exceed ours.